“Taking Wealth From the Air”

Grand Central Terminal is celebrating its 100th anniversary…see photo essay here. The station building itself is only the most visible element of a massive, courageous, and very profitable infrastructure project carried out by the New York Central Railroad.

In the late 1800s, hundreds of trains a day entered and departed Manhattan on the NY Central lines. All were hauled by steam locomotives, and large amounts of land in the vicinity of the terminal were used for yard and support facilities. People living in the vicinity of the tracks probably did not view steam trains, with their smoke and cinders, as being especially romantic. Indeed, the smoke was so thick at some points as to represent a serious safety hazard, impeding visibility of signals.

William Wilgus, the NY Central’s chief engineer, realized that if steam were to be replaced by electricity for this segment of the railroad, then the trackage could be roofed over and the surface would become extremely-valuable real estate. The idea got a strong impetus when in November 1902 a train missed a smoke-obscured red signal and slammed into a stopped train, killing 15 people. The next month, Wilgus wrote to the railroad’s President, arguing for the immediate adoption of his plan. (It had previously been discussed and agreed to in principle, but not funded.) He described the project as “taking wealth from the air”…”a remarkable opportunity for the accomplishment of a public good with considerations of private gain in behalf of the corporation involved.“ The terminal and its support facilities “could be transformed from a nonproductive agency of transportation to a self-contained producer of revenue — a gold mine, so to speak.”

The project represented a huge capital expenditure…$35 million, an amount representing half the railroad’s revenue for a full year. The Board of Directors approved it in 1903…in that same year, a law was passed forbidding railroads “to operate trains by steam locomotives in Park avenue in the city of New York south of the Harlem river,” the law to take effect in June 1908. (The Wilgus plan actually provided for electrified operation over a broader territory than that required by the law.)

For delivery of motive power to the trains, it was decided to use a 600 volt DC system with a third rail invented by Wilgus and his friend Frank Sprague. The selection involved a very public dispute between the DC proponents represented by Edison and GE and the AC faction led by George Westinghouse.

The whole huge project had to be accomplished without interrupting train service to the existing terminal. In 1906–nearly two years ahead of the state-imposed ban on steam trains–the Central began operating electric equipment to the old terminal facility. The new Grand Central Station took longer to finish, and was opened to the public on February 2, 1913.

More on the project and the station here. And here’s another article, focusing on the real-estate aspects of the project: Covering Tracks Paid Off Handsomely.

Wilgus was a high school graduate who studied drafting and engineering via a Cornell University correspondence course and private tutoring. I found the following description of him here:

He has a pleasing personality and made many friends years ago in Buffalo. They have remained loyal and watched his progress towards the top with gratification. I have never met a man who knew exactly what to do and say with so little consideration. He decides questions involving huge expenditures of dollars often in five minutes, and the remarkable thing about it is that he always seems to be right. I consider Mr. Wilgus one of the greatest construction men this country ever saw.


9 thoughts on ““Taking Wealth From the Air””

  1. The American College of Surgeons in Chicago sold the air rights to their headquarters and are now located on the upper floors of a tall building. The original building, donated by John B Murphy’s widow, has a deed of gift that will not allow it to be sold. It has been renovated but is still just as it was when Murphy died. My aunt worked as his scrub nurse.

  2. The project represented a huge capital expenditure…$35 million, an amount representing half the railroad’s revenue for a full year. The Board of Directors approved it in 1903…in that same year, a law was passed forbidding railroads “to operate trains by steam locomotives in Park avenue in the city of New York south of the Harlem river,” the law to take effect in June 2008.

    That’s a long waiting time for a law to take effect. Could it have been 1908?

  3. Japan has a number of private passenger electric railroads.They are profitable because they own property served by their operation. Very often there is a department store and office building over their terminal. These facilities get heavy pedestrian traffic.
    I know of no Gov’t owned railway that makes money,but, if such exists I would appreciate hearing of it.
    Grand Central does have some shopping but the traffic is nothing close close to what you get at Ikebukaro,Shinjuku or any of the major stations on the circle line.

    Let me say as a railfan, Japan is Railroad Heaven. Aside from fast and frequent service,one is impressed by the quality of design of their trains, particularly for their limited expresses. See this for example,which is fairly typical.


    Thanks for the post,David.

  4. …But Japan is not the USA — it generally has a far higher density of population, and that makes a huge difference in mass transit. There are very few areas of the USA which have such densities.

  5. Yes,the US is not Japan, and except for the Northeast Corridor,Amtrak is a complete waste of money. Obama’s high speed rail plans will never be implemented in any case. The one thing we could use from Japan is the superior industrial design of their trains, to the extent we have trains. I like trains,but I like prudent stewardship more.
    Interesting how Grand Central and Japan’s rail services succeeded largely as real estate deals.

  6. I recall the (private) Kintetsu Railway in Kyoto, whose terminal is not only co-located with their department store but pretty much requires you exit the station through the department store. And it is a very nice department store; commuters can probably do all their incidental daily shopping there on the way home from work.

    The whole electric railway/land development paradigm was invented in the US by the big interurban electric railway companies of the first part of the 20th century. They were destroyed by antitrust law and a variety of other hostile government acts, such as municipal governments overcharging them for the right to place tracks in the street. (The “Roger Rabbit” conspiracy theory that GM destroyed them to sell more buses is a complete nonsense.) The Japanese companies copied the US ones — even the equipment looks the same. I remember the Kintetsu equipment in the 90s looked a lot like the old South Shore cars in Illinois and Indiana.

    It’s very common to say that that paradigm only works in Japan because Japan is so crowded. But it worked in the States for a long time, and it works in more outlying parts in Japan where population densities are much less than the Tokyo and Osaka areas. I wonder if the real reason is the stronger private property rights in Japan, where eminent domain is largely nonexistent.

  7. Vanderbilt Hall, the former waiting area for GCT, has a very fine exhibit of architectural drawings, fixtures,old photographs and miscellaneous items of interest. This will be up until march 15. If you are in the area I recommend dropping by. The Oyster Bar has excellent Tuna Burgers at the counter and that is located underneath Vanderbilt Hall

  8. There was a computer simulation for early versions of Windows called A-Train, in which the player allocated money among rail services, real estate, and stocks so as to make a lot of money. It was based on the opportunity Japanese railroad companies (but definitely not U.S. railroad companies, nor interurbans after 1937) have to sell complementary services.

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